Reform of state plantation firms moving at slow pace

Reform of state plantation firms moving at slow pace

JAKARTA (JP): The reform of state-owned plantation companies
(PTP) which began in May, 1994, with the realignment of the 26
PTPs into nine groups, has been running much slower than planned.

Several analysts have expressed their fear that the
consolidation program might follow the fate of similar attempts
in the 1980s to improve the efficiency and productivity of the
state plantation sector, which at present covers an estimated 1.5
million hectares with assets totaling US$3 billion.

Agriculture Minister Sjarifudin Baharsjah admitted recently
that the grouping, which he called a historical milestone in the
overall consolidation of the PTPs, has hit some snags due to
grouping difficulties in Central and East Java.

"But the problems were solved after the grouping of the PTPs
in the two provinces was changed, separating sugar PTPs from the
ones that manage such crops as clove, cacao, tea and coffee,"
Sjarifudin added.

He said he had submitted the final report of the consolidation
team to the finance minister for approval.

"I can assure you that the directors of the PTPs are now
comfortable with their respective groupings and the merger
process can now be accelerated," he told The Jakarta Post.

Yet analysts who have closely monitored the restructuring
process contend that the grouping might be the only means of
overall, long-term reform.

"The grouping should have been followed by a merger process
last April. But how can you talk about a merger when the PTPs
within a group have not even consolidated their financial
reports," the analyst of an agronomy research center commented.

Most of the officials and analysts interviewed for this
article insisted on anonymity.

"This time I think the government should be really serious
about reforming the PTPs. Without mergers, I don't think they
will be able to compete with the big private companies which have
steadily expanded their tree crops," business analyst Christianto
Wibisono noted.

According to the original schedule, the merger process was to
take effect with last April's Presidential decree.

The agriculture and finance ministries set five criteria in
1994 for the consolidation of PTPs: The realignment of their
missions, optimum economies of scale, resilience to market
fluctuations, integration of upstream and downstream units and
financial soundness.

Under the first phase of the reform the 26 PTPs were
geographically realigned into nine groups:: Aceh, North Sumatra
I, II and III, Lampung, West Java, Central Java, East Java and
Sulawesi & Irian Jaya.

The restructuring was launched to address a number of PTP
weaknesses identified through a series of studies made in the
1980s and early 1990s by private and government institutions,
including the World Bank, the Indonesian Planters' Association of
Plantation Research and Development (AP3I), Agrobusiness Research
and Development Center.

Bureaucracy

The studies found that the PTPs, shackled by bureaucratic
command, lack a commercial mentality and the motivation to
improve productivity, efficiency and performance.

If the weaknesses are not removed, they concluded, the PTPs
will not likely survive commercially in an increasingly
competitive market.

The studies cited several main reasons behind the weaknesses:
Too much government intervention in PTP managements, lack of
corporate goals and accountability, conflicting responsibilities
for carrying out commercial and social missions, widely-spread
areas of plantations and joint marketing offices.

However, the agricultural officials and PTP executives that
have been benefiting greatly from the current structure of PTP
management have been lobbying hard to have the reform initiative
canceled or reduced to a meaningless exercise.

"They are afraid that if the reform is carried out they will
no longer be able to use PTPs as their cash cow," an analyst
said.

Hastjarjo Soemardjan, a senior researcher at AP3I, reckoned
that as long as the merger process is based entirely on business
sense there should not be any major obstacles to accomplishing
the process.

"After all, the owners of the PTPs are the same entity
(government). I think the owner (government) should be firm
regarding the merger despite the protests from some quarters,"
Hastjarjo said.

He argued, however, that the merger process should be
accompanied by the streamlining of the PTPs mission.

"The PTPs should not be overloaded with numerous missions." he
pointed out.

Aberson Marle Haloho, a member of the House Budgetary
Commission, saw heavy government intervention as the main barrier
to improving PTP efficiency and productivity.

Since the PTPs are owned by the government, all parties-- from
the sub-district and provincial administrations up to the
ministries in Jakarta-- assume they have the right to meddle in
PTP operations, Aberson noted.

"Now since PTPs no longer enjoy special treatment and
facilities from the government and they have instead to operate
fully as private commercial entities, they should be unshackled
from official bureaucratic red tape," Aberson said. (hdj/pwn/vin)